Credit Suisse Hit With $287.5 Mil Judgment In Lake Las Vegas Deal

Last Friday, September 4th, was a very good day for James Dondero and his investors at Highland Capital Management, as a federal judge ruled that Credit Suisse owes a unit of Highland Capital Management $287.5 million regarding a failed real-estate loan at the Lake Las Vegas luxury residential development.

U.S. District Judge Dale B. Tillery ruled that Credit Suisse must pay $211.9 million in damages and restitution as well as $75.6 million in prejudgment damages plus interest (total of $287.5 million) for breaching a contract on a loan connected to the planned Lake Las Vegas community that went bankrupt almost eight years ago.

More on Credit Suisse and Highland Capital lawsuits

This case was the biggest, but Highland Capital has additional claims totaling $377 million in damages pending against Credit Suisse relating to the Swiss bank’s fraudulent loan program to developers of luxury properties in the American West.

In this case, a holding company of Highland Capital claimed that Credit Suisse intentionally gave an inflated appraisal for a 2007 loan for Lake Las Vegas, a luxury residential and resort community that filed for bankruptcy in 2008.

Credit Suisse’s role was as a middleman for the project owners working to set up financing for loans from non-banking institutes like Highland. The bank was compensated with hefty fees from the various transactions. The developments eventually collapsed as the residential real estate market crumpled at the time. and investors such as Highland took giant losses.

Just before Christmas last year, a Texas jury determined that Credit Suisse had intentionally concealed material facts to fraudulently lure Highland to participate in a 2007 refinancing of the Lake Las Vegas project, and also conspired with appraisers to inflate valuation. Highland Capital was awarded a $40 million verdict against the bank. Joseph Checkler of the Wall Street Journal reports that Highland Capital can now choose between the $40 million or $287.5 million award.

Statements from both parties

A Credit Suisse spokeswoman noted over the weekend that: “We respectfully disagree with the court’s decision and intend to pursue all available options to vindicate ourselves in this matter.”

After the verdict, a spokesperson for Highland Capital enthused: “We are pleased the Texas State Court ruled in our favor on all claims and agreed with us that Credit Suisse not only committed fraud and other torts, but also breached the terms of a contract with certain Highland funds when it committed a massive and systematic fraud, costing investors of the Lake Las Vegas development hundreds of millions of dollars.”